Bill Gross’s view on short-term interest rates

In the previous part of this series, we saw that Bill Gross is worried about both the equity (QQQ) (SPY) and bond markets (BND). He also believes that the central banks’ changes in strategy could push short-term interest rates higher than the long-term interest rate.

Investment Avenues during the Rise of Short-Term Interest Rates

Gross believes this situation could lead to the next recession in the global economy (ACWI). He believes a gradual rate hike is good for the economy since zero interest rates inflated asset prices and economic growth. It’s difficult to achieve real economic growth during an ultra-low interest rate environment. He thinks the central banks should implement their strategies very carefully and cautiously. A gradual rate hike is also appropriate when economies are showing stronger movements.

Investing in high-yield bonds and short-term bond ETFs

Investors generally invest in high-yield bonds (BND) when there are expectations for higher economic growth (VFINX) (IWM). Investors could also look at short-term bond ETFs in this kind of scenario.

Performances of high-yield bonds and short-term bond ETFs

Some high-yield bond ETFs such as the iShares 0-5 Year High Yield Corporate Bond (SHYG), the SPDR Barclays Short Term High Yield Bond (SJNK), the PowerShares Senior Loan ETF (BKLN), and the PIMCO 0-5 Year High Yield Corporate Bond ETF (HYS) returned 3.5%, 3.5%, 0.75%, and 3.8%, respectively, on a YTD (year-to-date) basis as of July 20, 2017.

The iShares 1-3 Year Treasury Bond (SHY), which tracks the performances of short-term duration bonds, rose nearly 0.39% on a YTD basis as of July 20, 2017.

You also may be interested in reading Ray Dalio to Investors: “Keep Dancing but Closer to the Exit.”

Latest articles

Today, Canopy Growth announced that it acquired the Saskatchewan-based KeyLeaf Life Sciences along with entities relating to the company and its intellectual property. Here's what you need to know about the completed deal.

Yesterday, Tyson Foods (TSN) and fellow meat producers Pilgrim’s Pride (PPC) and Sanderson Farms (SAFM) took a hit to their stocks after news came out about an investigation over price-fixing allegations.

On June 24, RH (RH) was trading at $115.01, implying a rise of 21.2% since its announcement of its first-quarter earnings results on June 12. Despite the surge in its stock price, the company is still trading at a discount of 29.1% to its 52-week high.

26 Jun

Roku Stock Fell Close to 7.0% Yesterday

WRITTEN BY Aditya Raghunath

Roku stock fell 6.8% yesterday to close trading at $93.25 per share. Roku stock has lost over 9.0% in market value in the last two trading days. Prior to this pullback, Roku stock was up a whopping 235.0% year-to-date.

26 Jun

Beyond Meat Stock Up Today on New Product Launch

WRITTEN BY Rajiv Nanjapla

Today, Beyond Meat (BYND) announced that its new product, Beyond Beef, will hit markets across the US later this week.

FedEx (FDX) ended fiscal 2019 on a dismal note and reported a significant YoY decline in fourth-quarter earnings. The delivery giant posted adjusted EPS of $5.01, which was 15.2% lower than the year-ago quarter’s earnings of $5.91. The company cited sluggish revenue growth and increased expenses as the main reason behind the dismal bottom-line performance.

172.31.59.107